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                                                                  EXHIBIT 10.5



                           CROSS TIMBERS OIL COMPANY



                             AMENDED AND RESTATED
                           1994 STOCK INCENTIVE PLAN



                        Amended as of February 15, 2000
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                               TABLE OF CONTENTS

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ARTICLE I.  GENERAL.....................................................   1
     Section 1.1.  Purpose..............................................   1
     Section 1.2.  Administration.......................................   1
     Section 1.3.  Eligibility for Participation........................   2
     Section 1.4.  Types of Awards Under Plan...........................   2
     Section 1.5.  Aggregate Limitation on Awards.......................   3
     Section 1.6.  Effective Date and Term of Plan......................   3

ARTICLE II.  STOCK OPTIONS..............................................   4
     Section 2.1.  Award of Stock Options...............................   4
     Section 2.2.  Stock Option Agreements..............................   4
     Section 2.3.  Stock Option Price...................................   4
     Section 2.4.  Term and Exercise....................................   4
     Section 2.5.  Manner of Payment....................................   4
     Section 2.6.  Restrictions on Certain Shares.......................   4
     Section 2.7.  Death, Retirement and Termination of Employment of
                   Optionee.............................................   4

ARTICLE III.  INCENTIVE STOCK OPTIONS...................................   5
     Section 3.1.  Award of Incentive Stock Options.....................   5
     Section 3.2.  Incentive Stock Option Agreements....................   5
     Section 3.3.  Incentive Stock Option Price.........................   5
     Section 3.4.  Term and Exercise....................................   5
     Section 3.5.  Maximum Amount of Incentive Stock Option Grant.......   6
     Section 3.6.  Death of Optionee....................................   6
     Section 3.7.  Retirement or Disability.............................   6
     Section 3.8.  Termination for Other Reasons........................   6
     Section 3.9.  Applicability of Stock Options Sections..............   6

ARTICLE IV.  PERFORMANCE SHARE AWARDS...................................   7
     Section 4.1.  Awards Granted by Committee..........................   7
     Section 4.2.  Amount of Award......................................   7
     Section 4.3.  Communication of Award...............................   7
     Section 4.4.  Amount of Award Payable..............................   7
     Section 4.5.  Adjustments..........................................   7
     Section 4.6.  Payments of Awards...................................   8
     Section 4.7.  Termination of Employment............................   8
     Section 4.8.  Transfer Restriction.................................   8

ARTICLE V.  AUTOMATIC GRANTS............................................   8
     Section 5.1.  Grant................................................   8
     Section 5.2.  Applicable Provisions................................   8

ARTICLE VI.  MISCELLANEOUS..............................................   9
     Section 6.1.  General Restriction..................................   9
     Section 6.2.  Non-Assignability....................................   9
</TABLE>
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<TABLE>
     <S>                                                                  <C>
     Section 6.3.  Withholding Taxes....................................   9
     Section 6.4.  Right to Terminate Employment........................   9
     Section 6.5.  Non-Uniform Determinations...........................   9
     Section 6.6.  Rights as a Stockholder..............................   9
     Section 6.7.  Definitions..........................................  10
     Section 6.8.  Leaves of Absence....................................  11
     Section 6.9.  Newly Eligible Employees.............................  11
     Section 6.10. Adjustments..........................................  11
     Section 6.11. Changes in the Company's Capital Structure...........  11
     Section 6.12. Change in Control....................................  12
     Section 6.13. Amendment of the Plan................................  12
</TABLE>
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                           CROSS TIMBERS OIL COMPANY

                             STOCK INCENTIVE PLAN


                              ARTICLE I.  GENERAL

     Section 1.1.  Purpose. The purposes of this Stock Incentive Plan (the
"Plan") are to: (1) associate the interests of the management of CROSS TIMBERS
OIL COMPANY and its subsidiaries and affiliates (collectively referred to as the
"Company") closely with the stockholders to generate an increased incentive to
contribute to the Company's future success and prosperity, thus enhancing the
value of the Company for the benefit of its stockholders; (2) provide management
with a proprietary ownership interest in the Company commensurate with Company
performance, as reflected in increased stockholder value; (3) maintain
competitive compensation levels thereby attracting and retaining highly
competent and talented directors and employees; and (4) provide an incentive to
management for continuous employment with the Company. Certain capitalized terms
are defined in Section 6.7.

     Section 1.2.  Administration.

          (a)  The Plan shall be administered by the Compensation Committee of
     the Board of Directors of the Company (the "Committee"), as constituted
     from time to time, each member of which shall be a disinterested person
     appointed by the Board of Directors. The Committee shall consist of at
     least two members of the Board of Directors. During the one year prior to
     commencement of service on the Committee, the Committee members shall not
     have participated in, and while serving on the Committee, such members
     shall not be eligible for selection as, persons to whom stock may be
     allocated or to whom Options or Performance Shares may be granted under the
     Plan or any other discretionary plan of the Company under which
     participants are entitled to acquire stock, stock options or stock
     appreciation rights of the Company other than the automatic grant of non-
     discretionary Awards as provided in Article V.

          (b)  The Committee shall have the authority, in its sole discretion
     and from time to time to:

               (i)    designate the executive employees (as defined in Section
          1.3) of the Company eligible to participate in the Plan;

               (ii)   grant Awards provided in the Plan in such form and amount
          as the Committee shall determine;

               (iii)  impose such limitations, restrictions and conditions, not
          inconsistent with this Plan, upon any such Award as the Committee
          shall deem appropriate; and

                                       1
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               (iv)   interpret the Plan and any agreement, instrument or other
          document executed in connection with the Plan, adopt, amend and
          rescind rules and regulations relating to the Plan, and make all other
          determinations and take all other action necessary or advisable for
          the implementation and administration of the Plan.

          (c)  Decisions and determinations of the Committee on all matters
     relating to the Plan shall be in its sole discretion and shall be final,
     conclusive and binding upon all persons, including the Company, any
     participant, any stockholder of the Company and any employee. A majority of
     the members of the Committee may determine its actions and fix the time and
     place of its meetings. No member of the Committee shall be liable for any
     action taken or decision made relating to the Plan or any Award thereunder.

     Section 1.3.  Eligibility for Participation. Participants in the Plan shall
be selected by the Committee from the executive employees of the Company or its
Subsidiaries. For the purposes of this Plan, (i) the term "executive employee"
shall include only employees who are officers, or who are determined by the
Committee, in its discretion, to be key professional, managerial,
administrative, or technical employees or supervisors, and (ii) the term
"Subsidiary" means any corporation or other entity of which at least 50% of the
voting securities are owned by the Company directly or through one or more other
corporations, each of which is also a Subsidiary. With respect to non-corporate
entities, Subsidiary shall mean an entity managed or controlled by the Company
or any Subsidiary and with respect to which the Company or any Subsidiary is
allocated more than half of the profits and losses thereof.

     Section 1.4.  Types of Awards Under Plan. Awards under the Plan may be in
the form of any or more of the following:

               (i)    Stock Options, as described in Article II;

               (ii)   Incentive Stock Options, as described in Article III;
                      and/or

              (iii)   Performance Shares, as described in Article IV.

Awards under the Plan shall be evidenced by an Award Agreement between the
Company and the recipient of the Award, in form and substance satisfactory to
the Committee, and not inconsistent with this Plan. Award Agreements may provide
such vesting schedules for Stock Options and Incentive Stock Options, and such
other terms, conditions and provisions as are not inconsistent with the terms of
this Plan. Subject to the express provisions of the Plan, and within the
limitations of the Plan, the Committee may modify, extend or renew outstanding
Award Agreements, or accept the surrender of outstanding Awards and authorize
the granting of new Awards in substitution therefor. However, except as provided
in this Plan, no modification of an Award shall impair the rights of the holder
thereof without his consent.

                                       2
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     Section 1.5.  Aggregate Limitation on Awards.

          (a)  Shares of stock which may be issued under the Plan shall be
     authorized and unissued or treasury shares of Common Stock of the Company
     ("Common Stock''). The maximum number of shares of Common Stock which may
     be issued pursuant to Awards issued under the Plan shall be 2,250,000*, of
     which 350,000 may be issued as Performance Shares. In addition, the maximum
     number of shares that may be issued to any individual hereunder pursuant to
     Options or Performance Shares issued hereunder shall be 120,000 and
     100,000, respectively.

          (b)  For purposes of calculating the maximum number of shares of
     Common Stock which may be issued under the Plan at any time:

               (i)    all the shares issued (including the shares, if any,
          withheld for tax withholding requirements) under the Plan shall be
          counted when issued upon exercise of a Stock Option or Incentive Stock
          Option; and

               (ii)   only the net shares issued as Performance Shares shall be
          counted (shares reacquired by the Company because of failure to
          achieve a performance target or failure to become fully vested for any
          other reason shall again be available for issuance under the Plan).

          (c)  Shares tendered by a participant as payment for shares issued
     upon exercise of a Stock Option or Incentive Stock Option shall be
     available for issuance under the Plan. Any shares of Common Stock subject
     to a Stock Option or Incentive Stock Option which for any reason is
     terminated unexercised or expires shall again be available for issuance
     under the Plan.

     *    Reflects 3 for 2 splits.

     Section 1.6.  Effective Date and Term of Plan.

          (a)  The Plan shall become effective on the date adopted by the Board
     of Directors, subject to approval by the holders of a majority of the
     shares of Common Stock present in person or by proxy and entitled to vote
     at the Annual Meeting of stockholders of the Company held in 1994.

          (b)  No Awards shall be made under the Plan after the tenth
     anniversary of the effective date of this Plan; provided, however, that the
     Plan and all Awards made under the Plan prior to such date shall remain in
     effect until such Awards have been satisfied or terminated in accordance
     with the Plan and the terms of such Awards.

                                       3
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                          ARTICLE II.  STOCK OPTIONS

     Section 2.1.  Award of Stock Options. The Committee may from time to time,
and subject to the provisions of the Plan and such other terms and conditions as
the Committee may prescribe, grant to any participant in the Plan one or more
options to purchase for cash or shares the number of shares of Common Stock
("Stock Options") allotted by the Committee. The date a Stock Option is granted
shall mean the date selected by the Committee as of which the Committee allots a
specific number of shares to a participant pursuant to the Plan.

     Section 2.2.  Stock Option Agreements. The grant of a Stock Option shall be
evidenced by a written Award Agreement, executed by the Company and the holder
of a Stock Option (the "Optionee"), stating the number of shares of Common
Stock subject to the Stock Option evidenced thereby, and in such form as the
Committee may from time to time determine.

     Section 2.3.  Stock Option Price. The option price per share of Common
Stock deliverable upon the exercise of a Stock Option shall be 100% of the fair
market value of a share of Common Stock on the date the Stock Option is granted.

     Section 2.4.  Term and Exercise. A Stock Option shall not be exercisable
prior to six months from the date of its grant and unless a shorter period is
provided by the Committee or by another Section of this Plan, may be exercised
during a period of ten years from the date of grant thereof (the "Option Term")
and may be subject to such vesting scheduling as the Company may provide in an
Award Agreement. No Stock Option shall be exercisable after the expiration of
its Option Term.

     Section 2.5.  Manner of Payment. Each Award Agreement providing for Stock
Options shall set forth the procedure governing the exercise of the Stock Option
granted thereunder, and shall provide that, upon such exercise in respect of any
shares of Common Stock subject thereto, the Optionee shall pay to the Company,
in full, the option price for such shares with cash or Common Stock.

     Section 2.6.  Restrictions on Certain Shares. As soon as practicable after
receipt of payment, the Company shall deliver to the Optionee a certificate or
certificates for such shares of Common Stock. The Optionee shall become a
stockholder of the Company with respect to Common Stock represented by share
certificates so issued and as such shall be fully entitled to receive dividends,
to vote and to exercise all other rights of a stockholder.

     Section 2.7.  Death, Retirement and Termination of Employment of Optionee.
Unless otherwise provided in an Award Agreement or otherwise agreed to by the
Committee:

          (a)      Upon the death of the Optionee, any rights to the extent
     exercisable on the date of death may be exercised by the Optionee's estate,
     or by a person who acquires the right to exercise such Stock Option by
     bequest or inheritance or by reason of the death of the Optionee, provided
     that such exercise occurs within both (i) the remaining Option Term of the
     Stock Option and (ii) one year. The provisions of this Section shall apply

                                       4
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     notwithstanding the fact that the Optionee's employment may have terminated
     prior to death, but only to the extent of any rights exercisable on the
     date of death.

          (b)  Upon termination of the Optionee's employment by reason of
     retirement or permanent disability (as each is determined by the
     Committee), the Optionee may exercise any Stock Options, provided such
     option exercise occurs within both (i) the remaining Option Term of the
     Stock Option and (ii) six months (in the case of permanent disability) or
     three months (in the case of retirement).

          (c)  On termination of the Optionee's employment by reason other than
     death, disability or cause (as each is determined by the Committee), the
     Optionee may exercise any Stock Options, provided such option exercise
     occurs within both (i) the remaining Option Term of the Stock Option and
     (ii) 30 days of the date of termination.

          (d)  Except as provided in Subsections (a), (b) and (c) of this
     Section 2.7, all Stock Options shall terminate immediately upon the
     termination of the Optionee's employment.

                     ARTICLE III.  INCENTIVE STOCK OPTIONS

     Section 3.1.  Award of Incentive Stock Options. The Committee may, from
time to time and subject to the provisions of the Plan and such other terms and
conditions as the Committee may prescribe, grant to any participant in the Plan
one or more "incentive stock options" (intended to qualify as such under the
provisions of section 422 of the Internal Revenue Code of 1986, as amended
("Incentive Stock Options")) to purchase for cash or shares the number of
shares of Common Stock allotted by the Committee. The date an Incentive Stock
Option is granted shall mean the date selected by the Committee as of which the
Committee allots a specific number of shares to a participant pursuant to the
Plan. Notwithstanding the foregoing, Incentive Stock Options shall not be
granted to any owner of 10% or more of the total combined voting power of the
Company and its subsidiaries.

     Section 3.2.  Incentive Stock Option Agreements. The grant of an Incentive
Stock Option shall be evidenced by a written Award Agreement, executed by the
Company and the holder of an Incentive Stock Option (the "Optionee"), stating
the number of shares of Common Stock subject to the Incentive Stock Option
evidenced thereby, and in such form as the Committee may from time to time
determine.

     Section 3.3.  Incentive Stock Option Price. The option price per share of
Common Stock deliverable upon the exercise of an Incentive Stock Option shall be
100% of the fair market value of a share of Common Stock on the date the
Incentive Stock Option is granted.

     Section 3.4.  Term and Exercise. Each Incentive Stock Option shall not be
exercisable prior to six months from the date of its grant and unless a shorter
period is provided by the Committee or another Section of this Plan, may be
exercised during a period of ten years from the date of grant

                                       5
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thereof (the "Option Term") and may be subject to such vesting scheduling as
the Committee may provide in an Award Agreement. No Incentive Stock Option shall
be exercisable after the expiration of its Option Term.

     Section 3.5.  Maximum Amount of Incentive Stock Option Grant. The aggregate
fair market value (determined on the date the Incentive Stock Option is granted)
of Common Stock with respect to which Incentive Stock Options first become
exercisable by an Optionee during in any calendar year (under all plans of the
Optionee's employer corporations and their parent and subsidiary corporations)
shall not exceed $100,000.

     Section 3.6.  Death of Optionee.

          (a)  Upon the death of the Optionee, any Incentive Stock Option
     exercisable on the date of death may be exercised by the Optionee's estate
     or by a person who acquires the right to exercise such Incentive Stock
     Option by bequest or inheritance or by reason of the death of the Optionee,
     provided that such exercise occurs within both the remaining Option Term of
     the Incentive Stock Option and one year after the Optionee's death.

          (b)  The provisions of this Section shall apply notwithstanding the
     fact that the Optionee's employment may have terminated prior to death, but
     only to the extent of any Incentive Stock Options exercisable on the date
     of death.

     Section 3.7.  Retirement or Disability. Unless otherwise provided in an
Award Agreement or otherwise agreed to by the Committee, upon the termination of
the Optionee's employment by reason of permanent disability or retirement (as
each is determined by the Committee), the Optionee may exercise any Incentive
Stock Options, provided such option exercise occurs within both (i) the
remaining Option Term of the Incentive Stock Option and (ii) one year (in the
case of permanent disability) or three months (in the case of retirement).
Notwithstanding the terms of an Award Agreement, the tax treatment available
pursuant to Section 422 of the Internal Revenue Code of 1986 upon the exercise
of an Incentive Stock Option shall not be available to an Optionee who exercises
any Incentive Stock Options more than (i) one year after the date of termination
of employment due to permanent disability or (ii) three months after the date of
termination of employment due to retirement.

     Section 3.8.  Termination for Other Reasons. Except as provided in Sections
3.6 and 3.7 or except as otherwise determined by the Committee in an Award
Agreement, all Incentive Stock Options shall terminate immediately upon the
termination of the Optionee's employment.

     Section 3.9.  Applicability of Stock Options Sections. Sections 2.5, Manner
of Payment; and 2.6, Restrictions on Certain Shares, applicable to Stock
Options, shall apply equally to Incentive Stock Options. Said Sections are
incorporated by reference in this Article III as though fully set forth herein.

                                       6
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                     ARTICLE IV.  PERFORMANCE SHARE AWARDS

     Section 4.1.  Awards Granted by Committee. Coincident with or following
designation for participation in the Plan, a participant may be granted
Performance Shares. Certificates representing Performance Shares shall be issued
to the participant effective as of the date of the Award. Holders of Performance
Shares shall have all of the voting, dividend and other rights of stockholders
of the Company, subject to the terms of any Award Agreement.

     Section 4.2.  Amount of Award. The Committee shall establish a maximum
amount of a participant's Award, which amount shall be denominated in shares of
Common Stock.

     Section 4.3.  Communication of Award. Written notice of the maximum amount
of a participant's Award and the Performance Cycle determined by the Committee,
if any, shall be given to a participant as soon as practicable after approval of
the Award by the Committee. The grant of Performance Shares shall be evidenced
by a written Award Agreement, executed by the Company and the recipient of
Performance Shares, in such form as the Committee may from time to time
determine, providing for the terms of such grant.

     Section 4.4.  Amount of Award Payable. Performance Shares may be granted
based upon past performance or future performance. In addition to any other
restrictions the Committee may place on Performance Shares, the Committee may,
in its discretion, provide that Performance Shares shall vest upon the
satisfaction of performance targets to be achieved during an applicable
"Performance Cycle.'' Failure to satisfy the performance targets may result, in
the Committee's discretion as set forth in an Award Agreement, in the forfeiture
of the Performance Shares by the participant and the return of such shares to
the Company, or have any other consequence as determined by the Committee.
Performance targets established by the Committee may relate to corporate, group,
unit or individual performance and may be established in terms of market price
of common stock, cash flow or cash flow per share, reserve value or reserve
value per share, net asset value or net asset value per share, earnings, or such
other measures or standards determined by the Committee. Multiple performance
targets may be used and the components of multiple performance targets may be
given the same or different weighting in determining the amount of an Award
earned, and may relate to absolute performance or relative performance measured
against other groups, units, individuals or entities. Certificates representing
Performance Shares shall bear a legend restricting their transfer and requiring
the forfeiture of the shares to the Company if any performance targets or other
conditions to vesting are not met. The Committee may also require a participant
to deliver certificates representing unvested Performance Shares to the Company
in escrow until the Performance Shares vest.

     Section 4.5. Adjustments. At any time prior to vesting of a Performance
Share, the Committee may adjust previously established performance targets or
other terms and conditions to reflect events such as changes in laws,
regulations, or accounting practice, or mergers, acquisitions, divestitures or
any other event determined by the Committee.


                                       7
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     Section 4.6. Payments of Awards. Following the conclusion of each
Performance Cycle, the Committee shall determine the extent to which performance
targets have been attained, and the satisfaction of any other terms and
conditions with respect to vesting an Award relating to such Performance Cycle.
Subject to the provisions of Section 6.3, to the extent the Committee determines
Performance Shares have vested, the Company shall issue to the participant
certificates representing vested shares free of any legend regarding
performance targets or forfeiture in exchange for such participant's legended
certificates.

     Section 4.7. Termination of Employment. Unless the Award Agreement
provides for vesting upon death, disability, retirement or termination of
employment, upon any such termination of employment of a participant prior to
vesting of Performance Shares, all outstanding and unvested Awards of
Performance Shares to such participant shall be cancelled, shall not vest and
shall be returned to the Company.

    Section 4.8.  Transfer Restriction. Any Award Agreement providing for the
issuance of Performance Shares to any person who, at the time of grant, is
subject to the restrictions of Section 16(b) of the Exchange Act, shall provide
that such Common Stock cannot be resold for a period of six months following the
grant of such Performance Shares.

                         ARTICLE V.  AUTOMATIC GRANTS

     Section 5.1. Grant. Each director who is not an employee of the Company,
its subsidiaries, affiliates and managers ("Non-Employee Director") shall on
the date on which he or she is initially elected or appointed a director of the
Company, be granted a Stock Option to purchase 1,000 shares of Common Stock for
the fair market price on the date of such grant, for an Option Term of ten
years. Thereafter, on the first business day following the Annual Meeting of
Stockholders of each subsequent year in which the Non-Employee Director is still
serving as a director (whether or not such Non-Employee Director's term has been
continuous), he or she shall automatically be granted a Stock Option to purchase
an additional 1,000 shares of Common Stock for the fair market price on the date
of such grant for an Option Term of ten years, and shall automatically be
granted, in lieu of a cash fee for serving as a director of the Company, 1,500
Performance Shares, which shall vest immediately upon grant and shall not be
subject to forfeiture, provided, however, that such Performance Shares shall not
be sold, assigned, pledged, hypothecated, transferred or otherwise disposed of
prior to six months after the date of grant, except by will or the laws of
descent and distribution. The Company shall deliver a certificate to the
director with a proper legend subscribed thereon giving notice of such
restriction on transferability.

     Section 5.2. Applicable Provisions. The provisions of Section 2.7(a)
relating to the death of the Non-Employee Director shall apply to options
granted under Section 5.1 and the Committee may not agree to the contrary in an
Award Agreement or otherwise. The provisions of Subsections 2.7(b), (c) and (d)
relating to disability and other termination of employment shall not apply to
options granted under Section 5.1, and the failure of a Non-Employee Director to
be re-elected as a director of the Company shall not effect the Stock Options
granted under this Section.

                                       8
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                          ARTICLE VI.  MISCELLANEOUS

     Section 6.1.  General Restriction. Each Award under the Plan shall be
subject to the requirement that, if at any time the Committee shall determine
that (i) the listing, registration or qualification of the shares of Common
Stock subject or related thereto upon any securities exchange or under any state
or Federal law, or (ii) the consent or approval of any government regulatory
body, or (iii) an agreement by the grantee of an Award with respect to the
disposition of shares of Common Stock, is necessary or desirable as a condition
of, or in connection with, the granting of such Award or the issue or purchase
of shares of Common Stock thereunder, such Award may not be consummated in whole
or in part unless such listing, registration, qualification, consent, approval
or agreement shall have been effected or obtained free of any conditions not
acceptable to the Committee.

     Section 6.2.  Non-Assignability. No Award under the Plan shall be
assignable or transferable by the recipient thereof, except by will or by the
laws of descent and distribution. During the life of the recipient, such Award
shall be exercisable only by such person or by such person's guardian or legal
representative.

     Section 6.3.  Withholding Taxes. Whenever the Company proposes or is
required to issue or transfer shares of Common Stock under the Plan, the Company
shall have the right to require the grantee to remit to the Company an amount
sufficient to satisfy any Federal, state and/or local withholding tax
requirements prior to the delivery of any certificate or certificates for such
shares. Alternatively, the Company may issue, transfer or vest only such number
of shares of the Company net of the number of shares sufficient to satisfy the
withholding tax requirements. For withholding tax purposes, the shares of Common
Stock shall be valued on the date the withholding obligation is incurred.

     Section 6.4.  Right to Terminate Employment. Nothing in the Plan or in any
agreement entered into pursuant to the Plan shall confer upon any participant
the right to continue in the employment of the Company or affect any right which
the Company may have to terminate the employment of such participant.

     Section 6.5.  Non-Uniform Determinations. The Committee's determinations
under the Plan (including without limitation determinations of the persons to
receive Awards, the form, amount and timing of such Awards, the terms and
provisions of such Awards and the agreements evidencing same) need not be
uniform and may be made by it selectively among persons who receive, or are
eligible to receive, Awards under the Plan, whether or not such persons are
similarly situated.

     Section 6.6.  Rights as a Stockholder. The recipient of any Award under the
Plan shall have no rights as a stockholder with respect thereto unless and until
certificates for shares of Common Stock are issued to him.

                                       9
<PAGE>

     Section 6.7.  Definitions.  In this Plan the following definitions shall
apply:

          (a)  "Award" shall mean a grant of Stock Options, Incentive Stock
Options or Performance Shares under the Plan.

          (b)  "Change in Control" means any one of the following:

               (i)     "Continuing Directors" no longer constitute a majority of
                       the Board of Directors of the Company; the term
                       "Continuing Director" means any individual who is a
                       member of the Board of Directors of the Company on the
                       date hereof or was nominated for election as a director
                       by, or whose nomination as a director was approved by,
                       the Board of Directors of the Company with the
                       affirmative vote of a majority of the Continuing
                       Directors;

               (ii)    any person or group of persons (as defined in Rule 13d-5
                       under the Securities Exchange Act of 1934, as amended
                       (the "Exchange Act")) together with his or its
                       affiliates, becomes the beneficial owner, directly or
                       indirectly, of 25% or more of the voting power of the
                       Company's then outstanding securities entitled generally
                       to vote for the election of the Company's directors;

               (iii)   the merger or consolidation to which the Company is a
                       party if the shareholders of the Company immediately
                       prior to the effective date of such merger or
                       consolidation have beneficial ownership (as defined in
                       Rule 13d-3 under the Exchange Act) of less than 50% of
                       the combined voting power to vote for the election of
                       directors of the surviving corporation or other entity
                       following the effective date of such merger or
                       consolidation; or

               (iv)    the sale of all or substantially all of the assets of the
                       Company or the liquidation or dissolution of the Company.

          (c)  "Fair market value" as of any date and in respect or any share
 of Common Stock means the average of the high and low sales price on such date
 or on the next business day, if such date is not a business day, of a share of
 Common Stock reflected in the consolidated trading tables of The Wall Street
 Journal (presently the NYSE - Composite Transactions) or any other publication
 selected by the Committee, provided that, if shares of Common Stock shall not
 have been traded on the New York Stock Exchange or other public securities
 market for more than 10 days immediately preceding such date or if deemed
 appropriate by the Committee for any other reason, the fair market value of
 shares of Common Stock shall be as determined by the Committee in such other
 manner as it may deem appropriate. In no event shall the fair market value of
 any share of Common Stock be less than its par value.

                                       10
<PAGE>

          (d)  "Option" means a Stock Option or Incentive Stock Option.

          (e)  "Option price" means the purchase price per share of Common
     Stock deliverable upon the exercise of a Stock Option or Incentive Stock
     Option.

          (f)  "Performance Cycle" means the period of time, if any, as
     specified by the Committee over which Performance Share are to be vested.

     Section 6.8.  Leaves of Absence. The Committee shall be entitled to make
such rules, regulations and determinations as it deems appropriate under the
Plan in respect of any leave of absence taken by the recipient of any Award.
Without limiting the generality of the foregoing, the Committee shall be
entitled to determine (i) whether or not any such leave of absence shall
constitute a termination of employment within the meaning of the Plan and (ii)
the impact, if any, of any such leave of absence on Awards under the Plan
theretofore made to any recipient who takes such leave of absence.

     Section 6.9.  Newly Eligible Employees. The Committee shall be entitled to
make such rules, regulations, determinations and Awards as it deems appropriate
in respect of any employee who becomes eligible to participate in the Plan or
any portion thereof after the commencement of an Award or incentive period.

     Section 6.10. Adjustments. In the event of any change in the outstanding
Common Stock by reason of a stock dividend or distribution, recapitalization,
merger, consolidation, split-up, combination, exchange of shares or the like,
the Committee may appropriately adjust the number of shares of Common Stock
which may be issued under the Plan, the number of shares of Common Stock subject
to Options or Performance Shares theretofore granted under the Plan, and any and
all other matters deemed appropriate by the Committee.

     Section 6.11. Changes in the Company's Capital Structure.

          (a)      The existence of outstanding Options or Performance Shares
     shall not affect in any way the right or power of the Company or its
     stockholders to make or authorize any or all adjustments,
     recapitalizations, reorganizations or other changes in the Company's
     capital structure or its business, or any merger or consolidation of the
     Company, or any issue of bonds, debentures, preferred or prior preference
     stock ahead of or affecting the Common Stock or the rights thereof, or the
     dissolution or liquidation of the Company, or any sale or transfer of all
     or any part of its assets or business, or any other corporate act or
     proceeding, whether of a similar character or otherwise.

          (b)      If, while there are outstanding Options, the Company shall
     effect a subdivision or consolidation of shares or other increase or
     reduction in the number of shares of the Common Stock outstanding without
     receiving compensation therefor in money, services or property, then,
     subject to the provisions, if any, in the Award Agreement (a) in the event
     of an increase in the number of such shares outstanding, the number of
     shares of

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<PAGE>

     Common Stock then subject to Options hereunder shall be proportionately
     increased; and (b) in the event of a decrease in the number of such shares
     outstanding the number of shares then available for Option hereunder shall
     be proportionately decreased.

          (c)  After a merger of one or more corporations into the Company, or
     after a consolidation of the Company and one or more corporations in which
     the Company shall be the surviving corporation, (i) each holder of an
     outstanding Option shall, at no additional cost, be entitled upon exercise
     of such Option to receive (subject to any required action by stockholders)
     in lieu of the number of shares as to which such Option shall then be so
     exercisable, the number and class of shares of stock, other securities or
     consideration to which such holder would have been entitled to receive
     pursuant to the terms of the agreement of merger or consolidation if,
     immediately prior to such merger or consolidation, such holder had been the
     holder of record of a number of shares of the Company equal to the number
     of shares as to which such Option had been exercisable and (ii) unless
     otherwise provided by the Committee, the number of shares of Common Stock,
     other securities or consideration to be received with respect to unvested
     Performance Shares shall continue to be subject to the Award Agreement,
     including any vesting provisions thereof.

          (d)  Except as herein provided, the issuance by the Company of Common
     Stock or any other shares of capital stock or securities convertible into
     shares of capital stock, for cash, property, labor done or other
     consideration, shall not affect, and no adjustment by reason thereof shall
     be made with respect to, the number or price of shares of Common Stock then
     subject to outstanding Options.

     Section 6.12.  Change in Control. If a Change in Control occurs while
unvested Performance Shares or unexercised Options remain outstanding, the
Committee shall waive any limitations set forth in this Plan or any Award
Agreement with respect to such Option or Performance Share such that such Option
shall become fully exercisable and such Performance Share shall vest upon a
Change in Control.

     Section 6.13.  Amendment of the Plan.

          (a)  The Committee may, without further action by the stockholders and
     without receiving further consideration from the participants, amend this
     Plan or condition or modify Awards under this Plan in response to changes
     in securities or other laws or rules, regulations or regulatory
     interpretations thereof applicable to this Plan or to comply with stock
     exchange rules or requirements.

          (b)  The Committee may at any time and from time to time terminate or
     modify or amend the Plan in any respect, except that without stockholder
     approval the Committee may not (i) increase the maximum number of shares of
     Common Stock which may be issued under the Plan (other than increases
     pursuant to Section 6.10), (ii) extend the period during which any Award
     may be granted or exercised, (iii) extend the term of the Plan or (iv)
     change the employees or class of employees eligible to participate in the
     Plan. The termination or

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<PAGE>

     any modification or amendment of the Plan, except as provided in subsection
     (a), shall not, without the consent of a participant, affect his or her
     rights under an Award previously granted to him or her.

          (c)  Notwithstanding Sections 6.12(a) and (b), the provisions of
     Article V of the Plan may not be amended more than once every six months,
     other than to comport with changes in the Internal Revenue Code, the
     Employee Retirement Income Security Act, or the rules thereunder.

     The undersigned hereby certifies that this is a true and correct copy of
the Cross Timbers Oil Company 1994 Stock Incentive Plan, as adopted by the
Company's Board of Directors on February 17, 1994 and the Company's stockholders
on May 17, 1994, as amended.


                                  By   Virginia Anderson
                                       ---------------------------------------
                                       Virginia Anderson, Secretary

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